The Future of Finance Is Now

The Future of Finance Is Now

The future of finance has already begun. Financial market players must act now. That’s why we continuously feel the pulse of the market and invest accordingly in employees and technology.

Intro

What Does the Future Look Like for Finance?

Extraordinarily rare is the person who can truly predict what the future holds in store, but sometimes a look at the present is all it takes to recognize arising opportunities. The financial industry is at a critical juncture and must come to grips with radical change. Business models are changing practically by the week, and all actors without exception currently find themselves at a crossroads. They are on the lookout for ideas on how to continue generating growth.

Many of the new ways of thinking are rooted in new technologies, infrastructures and data. The challenge is to utilize their full potential to tap new customer segments. We at SIX are working closely with our clients to futuristically transform the financial markets of today.

Future of Finance Reports
Digital Assets and ESG Investing: What Do Buy-Side Companies around the World Think about these topics?

For the global Cornerstones for Growth study, part of the Future of Finance series, Censuswide on behalf of SIX surveyed portfolio managers, asset allocators, and hedge fund managers across 300 international financial institutions in the UK, the US, Hong Kong, Singapore, Germany, Spain, and Switzerland.

Download: Read the Compiled Findings in the Report

Cornerstones for Growth

Cornerstones for Growth is the latest report in the Future of Finance series from SIX. Looking specifically at buy-side market participants, it gauges the growth drivers and challenges surrounding mass institutional adoption of two developing and topical areas: digital assets and ESG investing.  

There are some notable similarities around the drivers and challenges in both areas. However, there are also important differences, reflective of how advanced each market has become. According to the survey participants, the digital assets sector is experiencing rapid evolution and holds immense potential. However, they emphasized the need for effective and secure market infrastructure to boost confidence and accelerate its growth. ESG investing is more established among buy-side institutions, with the focus now on high-quality data and the mechanisms needed to report accurately and compliantly in a changing regulatory landscape. 

Demand for Digital: All About Confidence as Appetite for Digital Assets Grows

It appears that digital tokens are at an inflection point in terms of adoption by international buy-side companies. Nearly seven in ten (69%) buy-side companies that took part in the survey have plans to include digital tokens in their portfolios over the next 12 months (see graphic below). This figure rises to a substantial 83% of buy-side companies in Asia.

At present, 11% of respondents currently hold digital tokens in their portfolio. The US, where more than a quarter (29%) of those surveyed currently hold digital tokens, is presently leading the pack. With ambitions among the survey respondents to increase the total proportion of those holding digital tokens from 11% to 80% in the next 12 months, there is clearly strong momentum for the adoption of digital assets around the world.

It is also recognized that there are barriers to early adopters with these ambitions that need to be understood and overcome. Among those who do hold digital tokens, less than one in ten currently trades more than 80% of their holdings on regulated marketplaces. Overall, respondents estimate that just 54% of their digital token holdings are traded on marketplaces with regulatory oversight.

In other words, almost half of the respondents’ volume of digital tokens is being traded in the dark. The shortage of regulated venues that offer digital tokens could be slowing progress towards greater institutional adoption of digital assets.

Do You Currently Hold Any Digital Tokens in Your Portfolio(s)?

Utility tokens and asset-backed tokens but not digital currencies (cryptocurrencies, CBDCs, and stablecoins)

Investing for the Future: Widespread ESG Allocation Expected but Data Concerns Persist

ESG investing is more mature relative to the digital assets space, and as a result is more frequently incorporated into the investment decision-making processes of buy-side market participants. On average, 54% of respondents’ portfolios are currently estimated to be allocated to ESG investments strategies. The share of respondents whose ESG allocations have not yet reached 20% of their total portfolio(s) is now in single figures.

It is still true that, on average, almost half of portfolios are not currently allocated to an ESG investment strategy. Yet, it is an area that has experienced a significant surge in interest over the past decade, with its increased presence in investing discourse reflective of a rapidly growing relevance.

While ESG isn’t yet the overwhelmingly dominant force in investing, the survey indicates that this is likely to change in the next five years (see graphic below). 84% of respondents expect their ESG allocations to grow in that period. This is an apparently universal ambition: The proportion of respondents in Asia, Europe, and the US that expect growth is between 80% and 90%. Whilst countries like Germany and the US did not predict any decrease in their ESG allocations at portfolio level, there was no country where more than 5% of survey participants predicted a decrease over the next five years.

21% of the respondents said that increased availability and higher quality of ESG data were the main enablers to support growth. Higher numbers in the US (34%) and the UK (31%) reflect the slightly more advanced nature of these two markets, as well as their international focus which requires source data for multiple jurisdictions. 

How Do You Project the Percentage of Your ESG Holdings Will Grow in the Next Five Years?

Learn more about both digital assets and the ESG investing space attracting growing interest from buy-side institutions in the Cornerstones for Growth Report from SIX.

Future of Finance Study 2022

For the global Future of Finance 2022 study SIX surveyed 297 international financial institutions covering asset management, wealth management, asset servicing, banking services, retail banking, and investment banking. They have provided insights about the growth opportunities for the finance industry, the increasing influence of ESG, the need for skilled staff, and the opportunities and risks of technological development.

Download: Read the Compiled Findings from the 2022 Study
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Further Glimpses into the Future

DeFi, DApps, and the Like: How the Financial System Is Becoming Decentralized

Now that the word “blockchain” appears to have crept into everyday parlance, neologisms like “DeFi” and “DApps” are going around these days. Find out in this blog post what they mean and how they’re changing the world of finance.

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Data Facilitates Markets

The importance of data goes beyond just being a source of income: Data links different businesses and even industries together. Read how data creates transparency, makes processes more efficient, and enables growth.

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What Is This Metaverse Thing Anyways? And What Does It Mean for Banks?

At least since Facebook changed its name, the term has been on everyone’s lips: the metaverse. What’s it all about? What do NFTs have to do with it? And what does it all mean for banks?

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eBill: Less Greenhouse Gases from Swiss Payment Transactions Thanks to Digital Handling and Storage of Invoices

With more than 50 million transactions in 2021, eBill is now established as the digital invoicing standard in Switzerland. The environment benefits, too. Learn how much greenhouse gas digital handling and storage of invoices can save compared to paper invoices.

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Open Banking: Taking a Wait-and-See Approach Can Get Expensive

The initial obligation to open banking has now turned into a dynamic international competition. Sven Siat, Head Connectivity in the business unit Banking Services of SIX, explains why reluctance will not pay off also for the Swiss banks: Those who do not provide up-to-date programming interfaces in the future will not have a lasting business model in the long run.

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Wealth Management in Change: 4 Competencies the Industry Needs to Build for the Future

Like other business areas within the Swiss financial center, wealth management is facing major challenges. What adjustments to the business model are necessary? Find out which competencies will be helpful in connection with data and technology.

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The Future of Finance Is Now

The Future Has Already Begun at SIX

SIX guarantees stability for financial markets and keeps its promises to customers. At the same time, we constantly prove that we deliver innovation even during times of great change. The future of the financial industry is unfolding here and now before our very eyes.

The Future of Assets Is Digital

With the SDX digital exchange, SIX is building a fully integrated, trading, settlement, and custody infrastructure for digital assets in a regulated environment based on distributed ledger technology. This now also includes services in the area of decentralized finance, or DeFi for short. SDX Web3 services are directed at institutional clients and are concentrating initially on the largest applications in DeFi: cryptocurrencies, NFTs, and other asset tokens.

More on SDX

ESG Data: Already Indispensable in Investing Today

Investors are increasingly inquiring about how their investments or portfolios align with ecological, social, and ethical aims. However, reliable information on ESG (environmental, social, and governance) criteria is vital in the future not just for investment consulting, but is indispensable also for risk management and financial institution compliance. Sustainability criteria and transparency regulations for securities issuers and financial products are constantly becoming ever stricter. SIX supports its customers by providing them with consistent and comparable ESG data, including regulatory data as well as performance indicators and special ESG indices.

More on ESG Data

New Business Possibilities with Open Banking

Open banking brings banks and fintechs together, thus enabling the co-creation of new customer-centric solutions. In other words, with the consent of a bank customer, a bank can share data with a fintech or other third-party provider. This, in turn, lays the foundation for the creation of new services with added value. We are still in the early stages of a trend that will forever change the financial industry. bLink from SIX already ensures today that collaboration and the flow of data can proceed securely, efficiently, and in a standardized way.

More on bLink

The Latest Finance Technology for the Swiss and Spanish Financial Centers

SIX supports national and international startup companies from the world of finance that have ideas and solutions for new services, design more efficient processes, or aim to tap new customer groups. SIX FinTech Ventures is a 50 million Swiss francs corporate venture capital fund that invests in early-stage startups around the world. This enables us to support the Swiss and Spanish financial centers with cutting-edge technologies, innovative solutions, and revolutionary business models. For independent fintech startups that are also capable of growing on their own and which meet a true customer need, SIX is a partner on equal footing.

More on SIX FinTech Ventures

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